House of Fraser profits plunge 46% in first half of 2016

House of Fraser profits dived nearly 50% in the first half of the year as the department store said it faced a “very challenging retail environment” in the light of unseasonable weather and Brexit uncertainty.

Underlying profits fell 46% from £9.2m 12 months ago to £5m in the six months to the end of July – excluding interest payments, tax, write downs on the value of property, and a one-off fall in income of nearly £4m related to a new credit card agreement.
Profits were hit by the increased cost of delivering goods ordered online and a decline in sales of House of Fraser’s own brands.
Total sales remained steady at £573.5m as the group’s established department stores experienced a 2.5% slump. Underlying sales, including a 17.8% rise in online sales, lifted 0.9%.
Nigel Oddy, chief executive of the group, which was bought by Chinese conglomerate Sanpower in April 2014, said House of Fraser had experienced an “extremely volatile trading environment”.
The profit slump comes after fellow department stores John Lewis and Next both revealed a fall in first-half profits as they were hit by the need to discount to clear summer stock.
Oddy said: “We would never use the weather as an excuse but we had record temperatures in September when we were selling autumn product and cold temperatures in June when we were trying to sell summer. When we have a warm day [in the autumn], sales drop off a cliff. Far more than ever before shoppers are buying now to wear now.”
He said that shoppers had also been affected by uncertainty around the EU referendum since January this year, and consumer confidence continued to be affected by concern about what Brexit might mean for household finances.
“All of that goes into the pot and make a very volatile market and low consumer confidence,” Oddy said.
House of Fraser is trying to tempt more shoppers into stores by introducing new brands and concessions. It plans to install five Hamleys toy areas by the end of November and has also brought in All Saints, Monsoon and Mulberry.
The department store’s poor performance was in sharp contrast to online specialist Boohoo.com which revealed a better than expected 40% rise in sales and 129% rise in pre-tax profits in the six months to 31 August.
The clothing site said it had attracted 28% more shoppers and increased the amount each shopper bought as it expanded in Europe and the US and extended its ranges in menswear, lingerie and plus-size womenswear.